Flash Shortages Drive SSD Shifts

Several independent SSD and controller makers –including Stec, Smart Storage, Virident, FlashSoft and Link-a-Media -- have already been acquired by NAND chip and PC makers as part of their efforts to get into SSDs, said Alan Niebel, principal of market watcher Webfeet Research (Monterey, Calif.). Top among the remaining independents are Fusion-io, Violin, OCZ, Skyera and Nimbus Data, he said.

The NAND flash price rises in 2013 were in part fueled by reports of a fire this summer at a large SK Hynix fab in Wuxi, China. The fire only affected DRAM production, "but many OEMs bought [flash] on the fear of shortage," said Niebel

"Just based on capex [retrenchments] today's budding NAND shortage should run from the second half of this year to mid-2015," said Jim Handy, a veteran flash analyst at Objective Analysis (Los Gatos, Calif.).

"Since everyone except IM Flash is converting to new technologies that they have never tried before -- either high-k gate dielectrics or 3-D -- there are likely to be a lot of stumbling blocks that would push the end of the shortage out to 2016 or even 2017," said Handy.

For LSI, the issues are painful but manageable. Only about ten percent of its business is currently in flash-related products and it has diverse bets in the flash market, said Talwalkar.

LSI now makes 17 custom versions of its Sandforce SSD controllers, including ones for Samsung and SanDisk. It also sells its own PCI Express flash cards for accelerating server applications, following in the footsteps of market pioneer Fusion I/O.

For LSI a bigger shift in 2013 came in its larger business related to hard disk drives. Last year LSI customer Seagate commanded a bigger portion of the HDD business given its favorable supply-chain position in the wake of Thai floods.

Seagate's good fortune helped spike LSI's 2012 growth to 23 percent last year. Seagate's position and LSI's HDD-related business moderated this year, impacting LSI's overall revenues and profits which slumped about 10 and 50 percent respectively in the first nine months of 2013.

It seems highly likely to me that as the price expected by the market for SSD's falls, the available margin for anybody other than the NAND makers disappears. It makes sense for the NAND makers to want to control the format their products are sold in and to make their products look best, hence doing their own SSD's or even their own controllers. By doing this the SSD's can get closer to being competitive in price to HDD's, enough for their own advantages in terms of speed, shock resistance power etc to make sales happen. It's only natural that computer manufacturers are ditching SSDs given the greater cost compared to HDDs, unless consumers want to upgrade which is only going to account for a very small space within the larger market. As for flash makers trying to grab business from independnet card makers, regulators would have been all over that had the idea come to the surface, not to mention it may not be worth the costs of selling below what it takes to manufacture the components.

It seems highly likely to me that as the price expected by the market for SSD's falls, the available margin for anybody other than the NAND makers disappears. It makes sense for the NAND makers to want to control the format their products are sold in and to make their products look best, hence doing their own SSD's or even their own controllers. By doing this the SSD's can get closer to being competitive in price to HDD's, enough for their own advantages in terms of speed, shock resistance power etc to make sales happen.

Note that at the same time the computer manufacturers are ditching SSD's in the sense of a bought in HDD replacement, and building their own on the motherboard - look at the latest MacBook's.

SSD as a plugin replacement for HDD's may therefore have only a limited market lifetime in newly manufactured equipment, leaving consumer end upgrades as the only market.

You could make a case the handful of global flash makers are using their clout and lower costs to grab buisness from independent card makers. I'm not sure if that's a big enough issue to arouse regulators.

I know the price pressure out there is intense. Anyone haerd of selling below cost to buy market share?

How very timely that OCZ reported today that they will file for bankruptcy and try to sell their assets to Toshiba. OCZ's previous management often blamed their slower than expected sales growth on NAND supply shortages however I don't think that was the entire story. It's quite sad that such great technology was so mismanaged (as is happening with Violin Memory). Sometimes "visionary" CEOs that ignore all opposition and charge on ahead hoping the market will catch up to them if only they spend enough are in the end just crazy not eccentric.

According to most data sources and nand producers, nand prices have been steadily declining for last several months. Lsi issues are due to samsung delivering new ssds with their own controller. Side note ... two of the largest acquisitions listedb were by wd..... which is not a pc vendor or a nand producer